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"Banking" on Recovery !

I am in India due to some personal matter hence could not post my blog for last couple of weeks. Indian economy is very hot - I can feel it given the traffic conditions when I was coming out of Mumbai or going to Pune. Roads are improving but still has long way to go before infrastructure could handle onslaught of new cars and two-wheelers. Today only I was reading that nearly 2 million cars and 10 million two wheelers are sold in India every year. Not sure where is space to drive all those new cars !

Now coming to today's topic - last couple of posts I am been recommending sectors and some few picks in those sectors. Both energy and real estate picks did very well since I recommended (see my last two posts). This week's theme is "banking".

Overall banking sector has been doing very well and would continue to do well. Most of the bad news is out, economy is recovering, unemployment is stabilizing and banks are in the process of repairing their balance sheets. So unless complete world falls apart, this sector provides excellent opportunities to provide market beating returns. Here are some of the picks:
  • US regional banks: Key ($7.35), RF ($7), SNV ($2.80) and for risky investors CBC-PB ($3). These banks provide direct exposure to recovery in US real estate
  • European banks: ING ($9.9), AIB ($3.70) and NBG ($4.20). These banks provide direct exposure to recovery in Europe and European leaders fixing PIIGS issue once for all
  • Leveraged ETF: FAS (below $70) - this is most risky which provides 3x exposure (up or down) to banking sector. This is recommended for those who can bear extreme risk and volatility. This provides leveraged exposure to big banks like GS, JPM, BAC recovering. If sector recovers as I am predicting, FAS could reach $120
Overall markets seem to have found its footing after more than 5% correction and looking forward to Q1CY10 results.

Good luck !

/Shyam

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